Analyst Says NYSE Needs to Go ECN Route

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The New York Stock Exchange expects to complete its transformation into a hybrid marketplace this month, but not everyone is happy about the change.

One advocate for shareholders of NYSE Group believes the company should roll back its recent fee increases and eliminate its trading floor.

That's the only way to slow the decline of its market share, according to Diego Perfumo, an exchange analyst associated with research boutique Majestic Research.

Perfumo believes that "without an efficient non-intermediated central liquidity pool, the NYSE is at risk of further market share losses." Perfumo maintains the NYSE's hybrid plan is a mistake that will push more trading off-board once the Securities and Exchange Commission's Regulation NMS goes into effect in February. Trading should be conducted in a fully automated environment such as that of Nasdaq, Perfumo advises.

The August increase in trading fees has only exacerbated the situation, leading to a big jump in Nasdaq's share of trading in NYSE-listed securities, the analyst notes.

Data from Nasdaq shows its share of matched volume in NYSE names has jumped from 9 to 12 percent since the price increase.

An NYSE spokesperson did not respond for comment. The Big Board's stock price stood at about $61 at one point in mid September, down from its opening IPO trade of $67 in March.